Correlation Between SunLink Health and Primoris Services

Can any of the company-specific risk be diversified away by investing in both SunLink Health and Primoris Services at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SunLink Health and Primoris Services into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SunLink Health Systems and Primoris Services, you can compare the effects of market volatilities on SunLink Health and Primoris Services and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SunLink Health with a short position of Primoris Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunLink Health and Primoris Services.

Diversification Opportunities for SunLink Health and Primoris Services

-0.02

Correlation Coefficient

SunLink Health  Primoris Services

Good diversification

The 3 months correlation between SunLink and Primoris is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services and SunLink Health is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SunLink Health Systems are associated (or correlated) with Primoris Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primoris Services has no effect on the direction of SunLink Health i.e., SunLink Health and Primoris Services go up and down completely randomly.

Pair Corralation between SunLink Health and Primoris Services

Considering the 90-day investment horizon SunLink Health is expected to generate 10.9 times less return on investment than Primoris Services. In addition to that, SunLink Health is 1.77 times more volatile than Primoris Services. It trades about 0.02 of its total potential returns per unit of risk. Primoris Services is currently generating about 0.33 per unit of volatility. If you would invest  5,010  in Primoris Services on September 5, 2024 and sell it today you would earn a total of  3,349  from holding Primoris Services or generate 66.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SunLink Health Systems  vs.  Primoris Services

SunLink Health Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SunLink Health Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SunLink Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Primoris Services

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunLink Health and Primoris Services

The main advantage of trading using opposite SunLink Health and Primoris Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunLink Health position performs unexpectedly, Primoris Services can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Primoris Services will offset losses from the drop in Primoris Services' long position.

The idea behind SunLink Health Systems and Primoris Services pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.